The Future is Blight

Green: Money and Sustainability Working Together Part 7 of 10: The impact of blight

tl;dr: Blight needs to be prevented, not dealt with.

We had a meeting with a county commissioner from Western Pennsylvania several months ago, and at the very end of the meeting, I asked him the following question: "What is the biggest issue that small towns and cities face today?" He, without hesitation, provided an answer that I now think about on an almost daily basis. His answer was simply one word: blight.

Blight, or urban decay, is when something that was previously functioning no longer is. In towns and cities, this can be seen in abandoned buildings and areas that are no longer operating at previous levels of activities. Buildings don't have to be abandoned to qualify as urban blight, they can simply be in disrepair. A broken window or walls with flaking paint means that the building is not operating at peak capacity, and that means blight is present. While it may be somewhat challenging to define, ultimately blight is pretty easy to identify when you see it. Does the dilapidated car on blocks in the front yard qualify as blight? Yes. Does the house where the owners refuse to take down their Christmas decorations in April count? By some standards, that would also count. Essentially, blight is simply neglect.

The consequences of such neglect are actually quite significant. Urban blight reduces the property value of not only the specific location but also the property values of the surrounding buildings. Studies show that it reduces the overall physical health of the residents. Believe it or not, it has actually been proven to increase gun violence. Most importantly, at least for local government officials, it reduces tax revenues.

When I was a little kid, I remember my dad telling me his version of this famous OWH quote. I personally believe that his version is better, but hey, I admit I might have a little bit of bias here. My dad's version goes like this: "Taxation is the foundation for civilization." I think you can agree it just is a lot easier to remember this way, right? Anyway, back to the topic, taxes are the lifeblood of all municipal activities. Taxes pay for every facet of activity that local governments are responsible for, ranging from police and fire departments to schools and libraries and other essential elements like infrastructure, parks, and services that help residents. Throughout this series, I have pointed out how local government officials do a phenomenal job of wasting tax revenue through inefficient and deliberately inflexible practices that do not embrace sustainable principles. This blog has looked at tax spending, and the amount of wasteful spending highlighted amounts to hundreds of billions of dollars a year. A town or city can save more money than its peers by embracing the conservation principles that I have covered in recent posts. The amount of savings, even for a small town, can be in the tens of millions of dollars. Even more importantly, this level of savings can actually be quantified, and if it can be quantified, it means that it can also be ranked. I am going to borrow a term from my previous life in the financial services world that is applicable here. And that term is: double alpha strategy.

In a very broad summary, alpha is the overperformance of an investment/manager compared to its respective index. When I was in the hedge fund world, we used alpha as a determinant to identify just how good a fund manager really is. I don't want to go down the rabbit hole of how alpha is employed, so we're going to stick to just broad concepts here so I can show you why this is important to blight and other issues in the sustainability world. All you have to know is that for almost every single scenario, alpha is calculating performance from the minute we buy a stock (or fund) to the moment we sell it. Buying is also known as going long and the opposite of long is short. You may have heard of the term "shorting a stock" and that is exactly what you would think it is. Instead of buying shares, you are selling them. How can you sell what you don't own? Well, you have to buy them back eventually, hopefully at a lower price than what you sold them for. If you find yourself in an investment called a "long/short equity fund", what it means is that the portfolio manager is simultaneously taking long and short positions, and what that means is that not only can that manager outperform on one side, they can also outperform on the other, hence the term double alpha.

Municipalities that save more money (whether it be from sustainability activities or not) are essentially generating alpha on the "long" side because they are outperforming their peers. However, municipalities that can simultaneously increase revenue better than their competition can generate additional alpha on that side as well. Local governments should not only be seeking ways to save money through sustainable initiatives but also ways to use sustainability to increase revenue or tax generation. Tax generation brings us back full circle to blight.

Frustratingly, I have yet to find any accurate calculations of the overall national impact of lost or uncollected tax revenues, but it is important to state that blight is not necessarily a situation that impacts every single community in every single municipality. Sadly, blight tends to exist in greater strength in traditionally marginalized communities. Go try and find an abandoned house in disrepair in a gated community. Well, I suppose good luck in getting into the gated community in the first place. However, you get my point. Disrepair happens in financially stressed neighbourhoods and cities. Look at any city in the traditional rust belt, and you will see entire city blocks that look absolutely horrible. The average home value in Detroit, one of the poster children of the rust belt, is $60,030. That's right, you can buy an entire house for less than what it would cost to buy a Lexus GX 460. The reason why homes are so cheap in Detroit is that people don't want to live there. That is what blight can create.

How can local governments tackle blight through the lens of sustainability? The answer is to stop playing defense and stop employing adaptive principles. The problem is that most cities play a passive role in blight prevention because there are a lot of participants in a neighbourhood's decline. Many properties that are neglected are rental homes. The landlords often do not live in those buildings, so they don't see the disrepair that exists. A local government only gets involved when a building is so bad that it is no longer safe to live in. When businesses close their doors, town officials don't open up new businesses to replace them. Municipalities do not jump in and buy foreclosed properties from the bank, claim eminent domain, or do much of anything to prevent blight from occurring. They might bring together a coalition of community leaders, NGOs, and chambers of commerce when things start looking really bad. Oftentimes, because of the delay or the vacuum of leadership, the cost and time of recovery for blighted communities takes many more years and millions more dollars than it needs to.

Adaptation is an approach where we figure out a way to exist with the "new normal." An adaptive principle, when it comes to blight and local governments, is to "stop the bleeding." Cities focus on initiatives that stop people from leaving the impacted area. All too often, how they do this is through increased police presence. Neighbourhoods do experience less decline when crime and property destruction go down, but they frequently don't become robust places again. The other problem is when these areas show signs of recovery, the "gentrification" process is criticized because it disrespects the history and character of that community. Oftentimes, it's simply a no-win situation, so it is no surprise that local governments aren't exactly enthusiastic about thinking beyond putting more cops on the streets and cameras on the buildings. Essentially and tragically, this is yet another example of the municipal preference to tackle all problems by using law enforcement. I don't know why people and local governments are obsessed with police officers being the answer to all things - it's not solving school shootings and it certainly isn't solving urban blight.

The opposite of those practices is to go on the offense and begin implementing mitigative policies. Mitigation strategies are complex because there is no "one size fits all" proactive approach to reducing and/or preventing urban blight. Some cities are encouraging their residents (through phone apps) to report blight as they see it occurring. Others are bolstering 311 (information) programs that are designed to inform residents about what blight is and how to prevent it. Unfortunately, when it comes to preventative strategies, this seems to be the limit of municipal ingenuity. That is a gigantic problem and one that Greenheart Partners desperately wants to tackle. Without giving away too many of the ingredients in our secret sauces, we believe that the best preventative programs must satisfy what we call the 4Cs.

Urban blight mitigation strategies must start by answering this question: "What does this community need to prevent neglect from occurring?" We believe the answer to this question is TTB. What the hell is TTB? Well, let's break it down by each letter:

T for Transparent: People are tired of huge aspirational goals without a structured pathway to achieve them. In project management, we use GANTT charts to map out how long a project will take and milestone dates that are important to the project. Programs become unpopular when people fail to see what their tax dollars are being used for. Criticism can be avoided with clear communication about progress and if there are setbacks, why they are occurring.

T for Transformational: Good mitigation policies should strive to alter behaviour to ensure that we don't arrive back at this situation again and again. Let's use an example from scenarios that many of us are all too familiar with- dieting. Many of us successfully lose weight, but we frequently revert back to past habits, and we find ourselves right back where we were before the diet or even worse. Only when we profoundly change our structural practices will we be able to permanently keep those excess pounds off. Transformational practices must be highlighted and be the driving goal of any municipal blight mitigation project. For example, taking an abandoned multi-unit building and turning it into studios for local artists to use is good not only because it removes an eyesore from the community (short-sighted), but also because it ensures that the solution to stagnation is creation (transformational).

B for Buy-In: Local Governments need to do more, but the cold truth is that everyone needs to do more. There is far too much civic apathy in this country, and the number of Americans that want problems solved without doing a single thing themselves is shockingly and tragically high. Buy-In means that whomever is impacted by the mitigation project has to be involved from the very beginning. When projects are completed without complete buy-in from the community, they often fail, and quickly. Think about that brand new playground that might not have been what the neighbourhood wanted, and now it lies dilapidated and completely unused, just like that treadmill in your bedroom that is just a bulky electric clothes hanger. Only with guidance can mitigation projects truly flourish. Community gardens are a great example of this, because cities don't just build them. Leaders have to present the benefits to municipal officials and the community leaders are especially motivated to guarantee that these types of projects really do help the community.

It may not seem fair, but municipalities can't allow projects to die on the vine because their partners didn't live up to their end of the bargain. Unfinished projects are prime contributors to blight. However, if the municipality bears all the responsibility, then they should get to decide what goes in that improved space. If that new building happens to be a mental health facility, there can't be an outcry of resistance, because ultimately the community itself didn't live up to their commitments. On the other hand, if a community steps up and delivers on its expectations, then there should be a greater sense of agency about what goes in that new space. Basically, buy-in means ownership and ownership means accountability.

Blight is a big problem, and as we have learned more about this issue, it is not surprising why this was the immediate answer from that Western PA county commissioner. City officials should be obsessed with tackling this issue because they are literally losing millions of dollars of potential tax revenue. We can solve many of these issues by looking at how local governments can be a larger presence in preventing blight (mitigation), not by being the active partner when it is already here (adaptation). Ultimately, local governments need to improve their planning practices and this is where sustainability shines brightest because, with smart planning, many problems don't even develop. In conclusion, that is sustainable municipal double alpha: solving the problems better than others, and having fewer problems to solve because of preventative initiatives. I know that municipal officials who successfully do this will have cities and towns that are the envy of all. For those municipalities who choose the mitigation path, the future is bright. not blight.